Five years ago, a newly inaugurated Gov. Arnold Schwarzenegger beseeched California voters to pass a $15 billion bond issue to refinance the state's burgeoning budget deficit and "cut up the credit cards" with another measure that prohibited any budget that spends more than its revenues.
The voters did what the new governor asked, but the Legislature's budget analyst said Thursday that Schwarzenegger's proposed 2009-10 budget appears to violate that 2004 ballot measure, Proposition 58, by using "revenue anticipation warrants," or RAWs, to borrow nearly $5 billion to cover a projected deficit.
Analyst Mac Taylor called it a "serious legal problem," implying that if the Legislature went along with the issuance of RAWs, they could be voided by the courts and/or lenders could refuse to buy them.
It's an ironic turn in the many-faceted political wrangle over the state's calamitous fiscal situation. But while raising the legal question about RAWs, Taylor may have also shown Schwarzenegger and legislators a path to escape from their political thicket by punting the key issues to voters.
Many other aspects of Schwarzenegger's proposed budget, and alternatives kicking around in the Legislature, would require voter approval, including borrowing against future lottery profits and tapping into voter-approved pots of money for children's health care, mental illness and after-school programs (Schwarzenegger's own pre-gubernatorial measure).
It's been assumed that any agreement with those elements would be placed before voters at a special election in June, but Taylor cogently argues that the election should be held as early in the spring as possible and should include voter approval of the RAWs to clear the legal cloud.
If an early election is needed to validate other aspects of a plan to close the state's deficit, estimated at $40 billion over the next 18 months and potentially worse, why not submit the biggest roadblock to political agreement – raising taxes – to voters as well?
Schwarzenegger and Democrats want tax increases, although they differ on which taxes and how much. Republicans have stoutly refused to vote for them – a refusal that carries weight since a two-thirds vote is required for tax increases.
Democrats have devised a legally questionable way around the two-thirds vote barrier involving a complicated swap of taxes and fees, but Schwarzenegger has vetoed a plan using that approach. Although he apparently was willing to go down that path, he and Democrats did not agree on other aspects of the deal. He now says he wants to pursue a bipartisan solution.
Conceivably, however, enough Republicans might be willing to submit a tax package to voters for their approval, which would get them off the political hook.
Will it happen? Who knows? But a rapid agreement on some immediate spending cuts to stave off a looming cash flow crisis and putting some new taxes before voters could be a face-saving way out.
Call The Bee's Dan Walters, (916) 321-1195. Back columns, www.sacbee.com/walters.
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